Caution Required on Sustainability Practices
Tuesday, 12th August 2014 at 5:24 pm
Caution is needed when surveying the uptake of sustainable practices in business, according to Paul Davies, Chief Operating Officer at sustainability firm Banarra.
McKinsey has recently published the results of its latest Global Survey on the strategic worth of sustainability to business. It’s an interesting read, offering both hope and cause for concern, and in many cases raising more questions than it answers. Its bottom line is that business executives see sustainability as increasingly important for their business. Yet it also finds that many companies have a long way to go to realise all the value-adding opportunities of their sustainability endeavours.
In reviewing the outcomes of this or any such survey on sustainability as a business enhancer, a number of questions spring to mind that temper how we understand and interpret such findings. There is value in these surveys as indicators of trends but there are also risks in reading too much into the findings and accepting them on face value. The overall conclusions of the survey are based on questions and responses that are nuanced by a number of considerations, which I’ve touched on below.
When we use the term ‘sustainability’ what are we really talking about?
One of the fundamental challenges in running a survey like that of McKinsey is the subject matter itself, in terms of a common understanding amongst responders of what we mean by ‘sustainability’. Even when a survey such as this provides a definition of the term, over the past 25 years there has been intense debate and a high degree of frustration on nailing the meaning of “sustainability”. A quick online review indicates that there are now hundreds of diverse definitions of sustainability, further confounded by the highly interchangeable and undisciplined use of related concepts such as triple bottom line, ESG, CSR, corporate responsibility, corporate citizenship, shared value and so on. Sustainability is a term much bandied about in business circles, yet with such little common agreement on definition that it effectively undermine the clarity of the responses.
In many ways, sustainability grew out of environment movement of the 90s, and still wears the environmental “cloak” in many sectors of industry. So the persistence of thinking evident amongst a large number of our own clients that sustainability “is mainly about the environment” is not surprising. For many businesses and industries, “environment” is a relatively straightforward, familiar, measurable expression of responsible business practice. Whilst this thinking is not “wrong” it does restrict understanding and appreciation that “sustainability” can and should embrace other business performance areas as well. Outside of “environment”, other aspects of “sustainable business behaviour” are struggling to gain serious attention, particularly in areas such as human rights, supply chain, community investment, governance and ethics.
Surveys aside, it is worth considering whether common agreement (or lack thereof) on the meaning of sustainability has enhanced or retarded its uptake by business. One might argue that the very flexibility of the term has been important to enable the idea of sustainability to evolve and take root in companies. Yet logic would suggest that trying to implement an idea that defies a precise (or at least a commonly accepted) definition would be a barrier to its pursuit by business. The related consideration is whether businesses see sustainability as an end in itself (i.e. a goal), or as a “means to an end” (i.e. a process), and if so, what end are we talking about? When are you actually “sustainable”?
If you’re trying to be sustainable, do the reasons matter?
The McKinsey survey results also indicate that corporate leaders and executives are “rallying behind sustainability” but that many still do so for reasons of managing company reputation, believing this has the greatest potential value-add for their business. Reputation management, and brand protection, have long been seen as key to maintaining and enhancing business value. Given that many companies’ market value is now vested much more in their brand than in their assets, it makes absolute sense to pursue business objectives that achieve this outcome. But is sustainability, at its core, mainly about creating value for the company? I’m completely on-board with the need to justify the business case to expend time, resources and effort on any corporate initiative, but sustainability has never just been about adding value to the company.
The problem I have with reputation as the key business driver to be sustainable is that its skews the field in regard to what get prioritised in the company’s sustainability strategy or agenda. If you consider a strategic approach to sustainability to be about identifying, prioritising and responding to key opportunities and challenges for the business in managing its impacts and externalities in the medium to longer term, then how do reputational considerations align with that? Having worked in corporate affairs for the best part of 15 years, I was compelled to focus much more on the tactical than the strategic. I realise I’ve probably alienated the majority of my fellow CA practitioners with this statement, but it’s the truth. Reputation management has a high tactical focus around dealing with the here and now rather than focusing ten to twenty years down the road, which is where sustainability is able to deliver its true worth.
I think the business drivers for being sustainable do matter. I have similar concerns with the increasingly popular concept of shared value. Like reputation management, shared value has an embedded proposition predicated on ‘what’s in it for me’. Whilst it’s perfectly sound to identify opportunities for the business to get a return on any investment, the concept leads to the questionable premise that businesses should only contribute to solving significant issues where there is value to be had for the business. This also applies to reputation management as a driver for sustainable or socially responsible endeavours. There are certain to be a whole bunch of local, regional and global issues that intrinsically need addressing but may not fit the shared value or “reputation” model – which makes them less likely to be considered worth solving by business, no matter how morally or intuitively wrong they are.
“Integrating” sustainability – what does that actually mean?
According to the McKinsey survey, executives believe that sustainability is becoming a more strategic and integral part of their businesses. It notes a trend that more and more companies are seeking to align sustainability with their overall business goals, mission, or values – with more CEOs saying sustainability is their number one priority.
In the course of engaging with many board and executives in my current work as a sustainability consultant I can’t help but raise an eyebrow when I hear the well-worn catch-phrase “sustainability is woven into the fabric of our business”. My somewhat sceptical reaction is based on parallel conversations with sustainability managers and other employees elsewhere in that same business. I honestly believe that those executives who profess the “fully integrated” sentiment are not trying to take me for a ride, but rather genuinely want to believe that their business is being aligned with sustainability principles. They can point me to strategies and policies that seek to embed sustainability ideals, but somewhere between the boardroom and the office floor the enactment falls short. The McKinsey survey supports this reality, with respondents clearly indicating the challenges they face in execution, particularly in the face of the competing pressures of short-term earnings, the lack of performance incentives and the lack of broader internal accountability on implementing sustainable measures.
The positioning of sustainability within business over the past 25 years is worth noting. Traditionally, sustainability teams (or sustainability departments) were very much evident in the early efforts at igniting sustainability within companies and are still quite common these days. This has in places led to a somewhat “trophy-like” or arcane view of sustainability within companies (“…and that’s our sustainability team over there – they’re really busy, so don’t disturb them”). More recently, sustainability is being seen as everyone’s responsibility in the business, with true embedding as the goal – no siloing, no evading ownership, no “out of bounds”. Even though it sounds the way to go, is it in fact working? There remains, in my view, a distinct lack of evidence for the success of this approach in relation to accountability, direction, goal setting, guidance, innovation and momentum. Many businesses that have embraced sustainability are still struggling with successfully transitioning from the ‘team-centric’ model to the ‘collective-accountability’ one, mainly at the implementation level.
The foregoing is not to denigrate the value of surveys such as McKinsey’s – they do offer insights into current business thinking on sustainability (by whatever definition respondents choose) and where opportunities may exist to truly step up the “embedding” of sustainable practices. But we need to retain a healthy amount of caution in forming conclusions around the extent to which sustainability is being prioritised in companies and the reasons why. We also need to accept that sustainability won’t be seamlessly embedded just because the board and leadership team said “make it so” through directives, policies, and strategies.
Like the survey findings, my experience of helping companies to infuse sustainable practices over the past seven years strongly suggests that the desire to become sustainable needs to be matched by a serious commitment of resources, leadership and accountability.
About the Author: Paul Davies is a Principal at Banarra and has worked on numerous reporting, materiality, stakeholder engagement, strategy, community standards and assurance assignments in the property, telecommunications, financial, mining, energy, legal and service sectors. Davies is a certified GRI trainer, a member of the GRI G4 working group on management approach disclosures and a member of the GRI G4 Practitioner's Network.